Archive for February, 2011

I did some back-testing with George’s 9-36-15 strategy using SPY and SH, and it is definitely a technique you want use. Believe it or not, bears could have shorted this historic rally by trading SH (the inverse S&P 500 ETF) and lived to tell about it.

Since the rally began in September, if you had gone long SH on every 9-36-15 cross-up, and gotten out before the bell, you would have only lost 2%. That’s pretty miraculous, and way better than having your face completely ripped off. Of course, trading SPY would have made profits instead, showing that it’s always a good idea to trade in the direction of the primary trend no matter how good your techniques are.

I used a longer 1,000 day period for the results that you can see on the 9-36-15 Cross page.

The rules that I used were suitable for a computerized strategy. For example, after a cross, it just goes long. In reality, you could probably get better entry points by waiting for a dip on the 1-minute chart, or using additional signals from the stochastic, MACD, etc.

With such a cold winter, you might think that oil supplies would be dipping, but that is not the case. As a matter of fact, supplies at Cushing, Oklahoma, the official delivery point for NYMEX futures contracts, recently hit an all-time high.

How is that possible? Two things: the Canadians are ramping up their tar-sands production (see the chart here), and “fracking” is starting to do for oil what it did for natural gas. Here is a quote from this Fox News story:

“In the Bakken formation, production is rising so fast there is no space in pipelines to bring the oil to market. Instead, it is being transported to refineries by rail and truck. Drilling companies have had to erect camps to house workers.”

Can you imagine that? Production is on such a rampage that it is overwhelming our infrastructure. We need to build more pipelines to handle it all.

At first, the experts didn’t think that fracking would work on the larger, stickier oil molecule. But they were wrong. Here’s Aubrey McClendon, CEO of Chesapeake Energy:

“We’ve completely transformed the natural gas industry, and I wouldn’t be surprised if we transform the oil business in the next few years too.”

A Credit Suisse analyst thinks that the USA might be able to cut imports by 60 percent in the next nine years.

Is that why President Obama thinks that he has the luxury of encouraging revolution in the Middle East?

And why is gasoline still so expensive?

Oil is the only commodity that comes in scores of different grades, and refineries are finicky about what they will allow into their enormously complex systems. Will we need to build more refineries capable of handling the Canadian sludge as opposed to our traditional “light, sweet” crude? I won’t pretend to be able to predict the price of gasoline. We might have to go through several years of an extensive infrastructure overhaul, but it should lower prices eventually, no?

With all the talk of Ben Bernanke inflating commodities, it’s good to consider the supply effects on prices also. And oil futures (symbol: CL) are down a couple of bucks so far this year, having yawned at the turmoil (ha, ha) in the Middle East. If oil goes into a UNG-like downtrend after things calm down, that could be an un-expected boost to corporate profit margins.

China’s embargo of rare-earth minerals last year looks to have been a major wake-up call for the USA. After all, it just won’t do to have our high-tech weaponry depend upon the kindness of strangers – Chinese strangers.

Or our low-tech weaponry. It seems that we are down to one plant in Pennsylvania that can make military-grade steel – and it is owned by a foreign company (ArcelorMittal). That was a bottleneck during the 2007 “surge” in Iraq.

The Director for National Intelligence has begun work on a “National Intelligence Estimate” to determine whether or not exporting our manufacturing base is bad for national defense. And that’s a big deal. Richard McCormack broke the story here.

This could eventually lead to trade barriers aimed at keeping out state-subsidized products from China, such as steel. So, domestic industrial companies could be expected to benefit, but high-tech companies too. McCormack recently published a story about Chinese networking companies, and wrote: “…many global telecom high rollers argue, in effect, that resistance is futile.”

Last week, Anderson Silva knocked out Vitor Belfort with a front-kick:

Turns out, the kick was a super-secret technique known only to actor, Steven Segal who taught it to Silva. Or so says Segal. Thirty-five years ago, my karate instructor called it a “snap kick” but what did he know, right? In any case, if there were an Academy Award for “Being Full of Yourself” Segal would win it in a landslide for this performance: